Qvist Henrik v. Clatronic Far East Ltd and Another
Read the full judgment text of HCA 1144/2015 on BabelCite. This High Court CFI judgment was delivered on 11 October 2019.
1. The 2 nd defendant was and is at all material times a company incorporated in Germany. It was and is a trader in electrical appliances.
Cited by 3 cases · Cites 10 cases
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HCA 1144/2015 [2019] HKCFI 2464 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1144 OF 2015 _____________ BETWEEN
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_____________ JUDGMENT _____________ A. INTRODUCTION 1.The 2nd defendant was and is at all material times a company incorporated in Germany. It was and is a trader in electrical appliances. 2.The 1st defendant was and is at all material times a company incorporated in Hong Kong. It was and is a wholly owned subsidiary of the 2nd defendant. A1. The employment of Qvist 3.By a “Managing Director Contract” dated 27 April 2009 (“the Employment Contract”), the plaintiff (“Qvist”), a Danish national, was employed as the Managing Director [1]as from 1 June 2009. There is an issue between the parties as to which of the 1st and the 2nd defendants was the employer of Qvist. The defendants say he was employed only by the 1st defendant, and Qvist says he was “employed by the 1st Defendant and the 2nd Defendant (or either of them)”. 4.The Employment Contract provided as follows:
The Employment Contract was signed by Qvist and, “for and on behalf of the company CLATRONIC Far East (‘CTC’))”, by “Emanuel Classen (Shareholder of CTC)”. Mr Emanual Classen (“Classen”) was a director of the 2nd defendant and the sole director of the 1st defendant. 5.The remuneration of Qvist was HK$110,000, with a 13th month’s salary payable by 31 January of each year. His total annual salary was therefore HK$1,430,000. He was also entitled to one economy return air ticket to and from Copenhagen per year for each of himself, his wife and his daughter, as well as health insurance for him and his family up to HK$18,000 per month. 6.The Employment Contract was varied by a “Change to Managing Director Contract” signed by Qvist and Classen (in the same manner as the original Managing Director Contract) on 22 October 2012,which provided a longer notice period (12 months) for termination by either party. This document recited as follows:
It replaced the original second paragraph with the following:
7.It is not in dispute that in the course of his employment, Qvist received instructions from Classen, Mr Andreas Bunge (“Bunge”),the purchasing director of the 2nd defendant, and Mr Heinz Stein (“Stein”),the Chief Financial Controller of the 2nd defendant.[3] Since the main role of Qvist was in merchandising, Bunge was his “direct supervisor” [4] and they were in constant daily contact throughout Qvist’s employment. 8.During his employment, Qvist signed, as Managing Director of the 1st defendant, employer’s returns of the 1st defendant that were filed with the Inland Revenue Department, whereby he was named as an employee of the 1st defendant. As the returns disclosed all the remuneration of Qvist according to the Employment Contract, it is reasonable to infer, and I find,that there were no similar returns naming the 2nd defendant as Qvist’s employer. 9.Save for the issue of the identity of Qvist’s employer(s), which I shall deal with below [5], I find the matters stated in this section A1 to be facts. A2. Tang 10.On 20 May 2011, Mr Tang Lap King (“Tang”) was hired as the Administration Manager of the 1st defendant. Amongst Tang’s duties was the preparation of cheques for Qvist, who was a signatory to the 1st defendant’s bank account [6], to sign, as well as managing the use of petty cash. Apparently the 1st defendant had, at any one time, three cheque books issued for its bank account, and Qvist let Tang keep all three cheque books, as well as the chop of the company which was used on cheques. Qvist was the only person working in the office of the 1st defendant in Hong Kong to have authority to sign cheques on behalf of the 1st defendant. Classen, who was based in Germany, was the only other signatory of the 1st defendant’s bank account in Hong Kong. 11.It turns out that Tang was a crook. By various means, Tang was able to procure the issuing of 50 cheques paying out a total of HK$1,438,215.38 from the 1st defendant’s bank account, either to himself or to a company called Fully Sound Enterprise Company Limited (“Fully Sound”), which he owned. The dates of the 50 cheques, copies of which have been obtained from the bank, ranged from 3 December 2012 to 25 November 2014, covering a span of almost two years. 12.I find the matters stated in this section A2 to be facts. A3. The dismissal of Qvist 13.Qvist was summarily dismissed as the Managing Director on 27 January 2015. Essentially these proceedings concern whether Qvist had been acting in breach of his duties as the Managing Director regarding his management, supervision and control of the financial matters of the 1st defendant. The defendants say that he had been, thereby allowing Tang to perpetuate his frauds, causing loss to the 1st defendant (for which it is counterclaiming) and justifying Qvist’s summary dismissal. Qvist denies that he had been in breach and claims that his summary dismissal was wrongful, and seeks damages for various heads of loss. 14.The circumstances leading to the exposure of Tang’s frauds and Qvist’s subsequent summary dismissal are not really in dispute. I shall set them out in this section A3 as findings of fact from the evidence before me. 15.It is not alleged that Qvist was personally involved in any of the fraudulent acts of Tang. 16.At all material times, the office of the 1st defendant was located in a building in Kowloon Bay, with the landlord being International Trademart Company Limited (“the Landlord”). In 2013, Qvist negotiated and agreed with the Landlord for the 1st defendant to move its office to another floor in the same building. Under the tenancy agreement dated 4 October 2013 for the new office, called the “2nd Tenancy Agreement” in this action, the 1st defendant was entitled to a rent-free period from 1 September 2014 to 31 December 2014. 17.On about 25 November 2014, Stein, to whom documents regarding the 1st defendant’s finances were sent monthly, sent an email to Qvist and asked him about a few entries on the bank statement of the 1st defendant. One of the items was a payment of HK$93,223.40. 18.Qvist asked Tang about the payments and Tang told Qvist that the HK$93,223.40 was “Nov rent to [the Landlord]”. Qvist so informed Stein. 19.Stein replied on 26 November 2014 as follows:
20.Qvist asked the external accountant of the 1st defendant (Messrs Simon W F Ng & Co (“SNC”)) about the resolution, and was told that a resolution was not necessary. As for the increase in rent, Qvist asked Tang and was told that the Landlord made a mistake as the increased rent should only be charged as from 1 December 2014. Tang said he had spoken to the Landlord about it and a refund of the overcharged amount would be made. 21.Qvist then sent an email to Stein on 28 November 2014:
22.In response, Stein said in an email sent on the same day:
23.Even though Tang then showed Qvist a debit advice, purportedly from the Landlord showing that it was crediting the 1st defendant with refunds for “display rent”, Qvist decided to check with the Landlord himself and on 1 December 2014 he sent an email to the Landlord, with the debit advice attached, saying:
24.On the same day, someone from the Landlord replied to Qvist:
25.When immediately confronted by Qvist about this, Tang tried to blame it on another person (not the sender of the reply) in the Landlord,and said that that person would try to pay back the 1st defendant in two days’ time. 26.By now Qvist thought that Tang might have been defrauding the 1st defendant. Very shortly after Tang was blaming someone in the Landlord, Qvist emailed Bunge (copied to Stein) as follows:
27.After some further investigations into the lease payments, Qvist then confronted Tang, who confessed. In an email sent to Qvist and copied to Bunge on 2 December 2014 at 11:38 am, Tang said:
28.There were various email exchanges between Qvist and Bunge on Tang’s frauds and Bunge asked Qvist to find out from Tang as much as possible. At 3:30 pm on 2 December 2014, Bunge sent an email to Qvist saying:
29.On 4 December 2014, Qvist wrote an email to Bunge as follows:
30.Bunge replied on the same day saying “all fine and according to my request/target” with further instructions on how to deal with anything Tang might say. 31.On 5 December 2014, Qvist summarily dismissed Tang. Apart from HK$67,000 which Tang gave back earlier, no further refund was obtained from him. The defendants say that the dismissal made it:
At the trial, Mr Christopher Chain, counsel for the defendants [7], most fairly if I may say so, withdraws this allegation. Qvist, on the other hand,claims that the dismissal was on Bunge’s instructions based on their email exchanges on 4 December 2014. 32.After discovery of Tang’s frauds, Qvist actively investigated including contacting the bank, creditors, suppliers, SNC, and the police, and more of Tang’s frauds were exposed, which Qvist reported to Bunge. 33.In particular, copies of all the cheques issued by the 1st defendant were obtained from the bank, and the 50 cheques bearing what appear to be the signature of Qvist and the chop of the 1st defendant,but payable to either Tang or Fully Sound, were found, even though the copy cheques (with the same numbers and amounts) in the files of the 1st defendant show them to be made out to payees such as the Landlord,or suppliers of services such as DHL Express (Hong Kong) Limited (“DHL”) and Federal Express (Hong Kong) Limited (“FedEx”), the courier companies. In the records of the 1st defendant, “faked” invoices and debit advices were found together with some “real” invoices. The cheques copies of which were obtained from the bank will be referred to herein as the “Faked Cheques” and the corresponding cheques found in the files of the 1st defendant with the same numbers are referred to as “the Smokescreen Cheques”. It is now accepted by both sides that the signatures of Qvist on the cheques that were actually presented to the bank were faked or forged by Tang, and the defendants no longer allege that Qvist signed any of the Smokescreen Cheques. 34.The defendants allege in the pleadings that Qvist lied when he replied to Stein on 28 November 2014 (§21 above), and he had habitually neglected his duties concerning the management of the financial affairs of the 1st defendant, which allowed Tang’s frauds to take place. The defendants claim that Qvist was liable to be summarily dismissed under section 9 of the Employment Ordinance [8], and the 1st defendant did so by an email dated 27 January 2015 (following a meeting the previous day between Qvist, Classen and Bunge). The letter, sent by the email on 27 January 2015 [9], said:
35.The email also enclosed a draft termination agreement, which Qvist refused to sign. In an email dated 28 January 2015 to Bunge, Qvist,after saying that nothing was agreed at the meeting on 26 January 2015,said, inter alia:
36.Upon terminating Qvist’s employment, the business contacts were informed, by an email sent under the name of Bunge, that Qvist “is no longer employee of either CTC Clatronic Far East Ltd. and/or CTC Clatronic International GmbH”. Bunge explains that this was to avoid confusion or misunderstanding because the business contacts might not fully understand the relationship between Qvist and the defendants, and does not mean that Qvist was employed by both. B. HOW TANG PERPETUATED THE FRAUDS 37.Both Bunge and Qvist, in their respective evidence, advance theories as to how Tang’s frauds were perpetuated. However, ultimately,what each of them says is not so much evidence, as neither of them has any direct personal knowledge of exactly what Tang did, but is merely speculation or analysis based on whatever evidence there is. I shall therefore not set out their respective evidence in detail, but, having regard to the existing evidence, and taking note of the analysis each of them makes,make the following findings of fact regarding how Tang perpetuated his frauds on a balance of probabilities. 38.The first point I note is that the defendants no longer allege that Qvist signed any of the 50 Smokescreen Cheques [10], and they also accept that the signatures of Qvist on the 50 Faked Cheques were faked or forged by Tang. I so find. 39.The second point I note is that it is Qvist’s evidence, which is not challenged and which I accept, that Tang prepared pieces of paper bearing copies of Qvist’s signature with the company chop, two of which Qvist found in Tang’s desk drawer after Tang had been dismissed, but there were probably other such blocks. These are referred to as “Signature Blocks” in this action. 40.For each of the 50 transactions in issue, Tang would make a photocopy of a totally blank cheque of the 1st defendant. On that photocopy, Tang would then fill in the name of a creditor/supplier of the 1st defendant, for example, the Landlord or DHL or FedEx, with an amount which was higher than the actual amount payable to the creditor/supplier. He then put one of the Signature Blocks on the photocopy, and then copied the whole cheque again, thus making a copy which on its face showed the payee being a proper creditor/supplier, an amount payable, and Qvist’s signature. This is a Smokescreen Cheque. 41.Tang would also create a faked invoice from the same creditor/supplier showing a demand for payment from that creditor/supplier for the sum he had put onto the Smokescreen Cheque. Tang also faked Qvist’s signature thereon. This he filed in the records of the 1st defendant together with the Smokescreen Cheque. 42.Tang then filled in, on the real blank cheque, the name of himself or Fully Sound with the same amount that he put onto the Smokescreen Cheque. This “real” cheque has the same number as the Smokescreen Cheque as the latter is a copy of the former. He then faked or forged Qvist’s signature on the cheque and presented it for payment to himself or Fully Sound. Since the cheque was to be presented to the bank, Tang could not use a Signature Block, but had to forge Qvist’s signature. This is a Faked Cheque. 43.In the meantime, the creditor/supplier had to be paid the real (lesser) amount owed, or it would chase up. Tang therefore arranged the payment of the lesser amount from funds of himself or Fully Sound. Tang/Fully Sound thereby gained the difference between the amount he put on the Faked Cheque and which he or Fully Sound received, and the amount he/Fully Sound paid the creditor/supplier. 44.The real invoice was probably disposed or destroyed by Tang. 45.In this way, the relevant bank statement of the current account of the 1st defendant would show a payment out of a certain amount from that account by means of a cheque with a certain number. That was in reality a payment to Tang or Fully Sound by that Faked Cheque, but of course the bank statement does not show the name of the payee. But if someone was to check, he would find a copy of a cheque (the Smokescreen Cheque) with that very number for that very amount,payable to a proper creditor/supplier, in the 1st defendant’s files, supported by the (faked) invoice. 46.Qvist suggests that Tang probably submitted to him genuine invoices together with cheques made out to the creditors/suppliers in the genuine amounts, otherwise Qvist might query why they were not paid on a regular basis, and that Tang then discarded those invoices and cheques. I accept that this was what happened on a balance of probabilities, and that would explain why a cheque book of the 1st defendant, kept by Tang,was found missing after Tang was dismissed. C. THE ISSUES 47.The defendants accept that the burden is on an employer to justify summary dismissal under section 9 of the Employment Ordinance,as the judgment to that effect of the Court of Appeal in Kwok Yan Man v Lau Cheung Kwong (t/a Yuen Tai Transportation Co) [11] is binding on me. 48.Despite disputes at the earlier stages of these proceedings, the parties have essentially agreed on the scope and nature of Qvist’s duties regarding the financial affairs of the 1st defendant. Since the defendants no longer allege that Qvist signed any of the Smokescreen Cheques (and thus any allegation that he was negligent in doing so is no longer pursued),the defendants’ case is essentially centred on two aspects, regarding the alleged failure of Qvist to set up any kind of system or arrangement to review or check Tang’s work so as to prevent or detect fraud, and the alleged failure of Qvist to detect Tang’s fraud when Qvist was spot-checking the bank statement every month. 49.The defendants’ case is put in the closing submissions as follows, in that Qvist [12] :
50.This is further elaborated [13] :
51.Both parties accept that Qvist had a duty to supervise members of the “Hong Kong Team”, ie all employees working in the office of the 1st defendant in Hong Kong including Tang, in the performance of their respective duties. 52.Qvist accepts in cross-examination that he had a duty to set up a system or mechanism for someone to check and review Tang’s work. 53.Further, in his witness statement, Qvist explains that, in relation to the financial affairs of the 1st defendant, his duties included the following:
54.Thus, Qvist accepts that part of his duties involved spot-checking payments from the 1st defendant’s bank account when he was online. At the trial, Mr Chain does not challenge what Qvist says regarding his duties. In particular, Mr Chain relies on what Qvist admits to be his duties at paragraphs (a), (b), (k), (m) and (n) which he says had Qvist carried them out properly he would have discovered Tang’s frauds even if he did not sign any of the Smokescreen Cheques. 55.In cross-examination, Qvist explains his modus operandi regarding spot-checking as follows. Every month, when he was arranging the payment of salaries of the staff of the 1st defendant online, he would look at the latest transactions in the current account of the 1st defendant. He would spot the recurring payments such as rent and courier charges. When he spotted some unusually large sum (about HK$20,000 [14] or more)being paid out other than rent or courier charges, he would then find a copy of the cheque and the relevant invoice to see what it was for, so as to confirm that the payment was a proper one. Mr Chain does not challenge Qvist that that was what he did, his point being that had Qvist performed his spot-check properly he would have found out about Tang’s frauds, perhaps when Tang did it for the very first time. I shall deal with this further below. 56.It therefore does not appear to be any real disputes between the parties that Qvist did have a duty to set up of a system for the checking and review of Tang’s work so as to guard against possible frauds by him,as well as to spot-check the bank statements for suspicious or irregular payments. I shall proceed on the basis of these duties referred to at §§51 – 53 above. Mr Nick Luxton, counsel for Qvist, also accepts, fairly and correctly, that whatever duty Qvist had to perform, he had to do it with due care and skill, or, as admitted in the pleadings, “with reasonable skill and competence” [15]. The question is whether Qvist had breached those duties and if he had whether the breach was such that he was liable to be summarily dismissed. Despite the wording of the email dated 27 January 2015 terminating Qvist’s employment, and the various pleas made in the pleadings, Mr Chain confirms at the trial that the only ground he is relying on to justify summary dismissal is that under section 9(1)(a)(iv) of the Employment Ordinance, namely that Qvist was, in relation to his employment:
57.Qvist alleges that his summary dismissal was unlawful. He alleges that his summary dismissal was wrongful as he had not breached any of his duties as an employee. He therefore claims lost wages in lieu of notice, long service leave pay, and damages (13th month salary, health insurance and the air tickets).[16] While liability is disputed, quantum of damages, if I hold that Qvist is entitled thereto, is agreed at HK$1,672,948,plus interest. 58.The 1st defendant counterclaims against Qvist for the sum of HK$665,828.99 (being the difference between all the payments to Tang or Fully Sound under the 50 Faked Cheques, less the amounts paid by Tang/Fully Sound to the creditors/suppliers) or such other damages as the court finds due. During the opening of the trial, I am informed by counsel that the parties agree that the quantum, should I find Qvist to be liable, to be HK$598,828.99, plus interest, giving credit to a sum of HK$67,000 which Tang had paid back.[17] Details of the 50 Faked Cheques and the loss suffered by the 1st defendant in relation to each are set out in a Schedule, which I attach to this Judgment. 59.The issues in this case which I need to resolve are therefore the following:
60.I shall consider each of these issues in turn and deal with the relevant evidence and make the necessary findings in the course of such consideration. Before that I should mention that I find Qvist to be generally a credible witness. Obviously, there is a lot at stake for him in this matter, but I do find him to be trying his best to recall what truly happened, sometimes for events that happened up to seven or eight years previously and when those matters would not have, at that time, appeared to be particularly important to him. Whenever he cannot recall any details, he frankly admits that. I do not find any real inconsistencies between his written and oral evidence, as Mr Chain seeks to suggest, as the latter is more an elaboration of the former, and I take into account the passage of time. As for Bunge, while I find him to be evasive at times, in particular when asked about certain emails and he refuses to acknowledge their plain meanings, I do accept that overall he is also trying his best to assist the Court by giving truthful evidence. However, as has been stated by the higher courts many times, the surer guide for a trial judge is to assess evidence and make findings according to the inherent probability in particular in light of available contemporaneous documents, rather than the general credibility and demeanour of the witnesses. This is what I shall do. Further, even though there may be areas where the evidence of Qvist and Bunge (and to a lesser extent Ms Luk Shan Hui (“Hui”), who was and is the office manager and a senior merchandiser of the 1st defendant, called by the defendants) is in conflict, for example the extent of work which Qvist did for the 2nd defendant rather than the 1st defendant, or the extent of the knowledge of, and supervision by, Classen, Bunge and Stein regarding the affairs of the 1st defendant, ultimately these are not issues which are material and which I need to resolve. D. DISCUSSION D1. The employer(s) of Qvist 61.I first deal with the issue of whether Qvist was employed only by the 1st defendant, or by both defendants. This issue is only relevant to which entity or entities is/are liable to Qvist should he succeed in his claim for damages. It is not suggested by either side that the consideration of and the answers to the other issues I identify above would be any different depending on my answer to this particular issue. 62.In my judgment, Qvist was solely employed by the 1st defendant. My reasons are as follows:
63.Mr Luxton refers to the fact that a substantial proportion of Qvist’s work was done on behalf of the 2nd defendant, and the fact that Classen, Bunge and Stein gave Qvist frequent and very detailed and strict instructions on almost every aspect of Qvist’s work and the operation of the 1st defendant (they “micro-managed”, as Qvist says in his testimony). I note that there is a dispute from Bunge as to the level of instructions given, and the discretion allowed, by the 2nd defendant to Qvist, and as to the proportion of work done by Qvist for the 2nd defendant as distinct from the 1st defendant itself as a trader in its own right. But even accepting for present purposes Qvist’s case on these matters in my judgment this does not mean that the 2nd defendant was an employer of his. It is only natural,and consistent with the terms of the Employment Contract, that a company exercises extensive control over its wholly-owned subsidiary and its staff,especially if the subsidiary was, according to Qvist himself, supposed to act as the local sourcing agent of the parent. That does not make the parent an employer of the staff of the subsidiary. The fact that most of Qvist’s work was for the 2nd defendant, if true, is also consistent with the 1st defendant’s role as a sourcing agent, and is neutral to the question of whether the 2nd defendant employed him directly. 64.As for the notice sent to business contacts after Qvist was dismissed, I accept Bunge’s explanation as to why the 2nd defendant was mentioned (see §36 above) as inherently probable. If one is to refer to the contemporaneous utterances of those representing the defendants as evidence in this regard, one ought also note the terms of the email dismissing Qvist on 27 January 2015 (§34 above), which suggests that only the 1st defendant was the employer. 65.Thus, even though it is possible as a matter of law, as Mr Luxton submits, for a person to be jointly employed by two separate persons or entities, in the circumstances of this case I find that Qvist was employed only by the 1st defendant. D2. Whether Qvist was in breach of his duties and liabilities therefor 66.As stated above, the case of the defendants against Qvist can be divided into two parts, the first being the alleged “Systemic Failure” and the second being the alleged “Specific Failure”. D2a. Systemic Failure 67.Under this head, in his written closing submissions, Mr Chain complains specifically about three matters, which he says gave Tang “the perfect opportunity to commit the Fraud”, by allowing Tang, on his own and unsupervised, to:
68.In his evidence, Qvist explains how the 1st defendant worked in terms of the issuing of cheques, and the monitoring of the monthly payments from its bank account by Qvist, SNC and the 2nd defendant:
69.In my judgment, Qvist’s duty to set up a system or mechanism for someone to check and review Tang’s work so as to guard any possible frauds was not a duty to set up a foolproof system that would guarantee that any improper acts of Tang would be prevented or detected, nor is this what Mr Chain submits. The duty of Qvist in this regard must, in my judgment, be a duty to put in place a system which is, in all the circumstances, including having regard to Qvist’s own qualifications and expertise, his own work schedule and other duties, the entire set-up and operation of the 1st defendant including in particular the handling of its financial affairs,which will be considered by a reasonable man in Qvist’s circumstances to be adequate to guard against any possible fraud of Tang, either in prevention or detection. 70.In my judgment, the “system” I describe and find at §68 above is such a reasonably adequate system, involving Qvist, being the only signatory of the bank account working in the local office, checking against original invoices before signing, and the various financial and accounting documents being sent over to SNC and the 2nd defendant every month. While I accept that Qvist himself had a personal duty to guard against,prevent and detect fraud and could not have simply left it entirely to SNC or the 2nd defendant, since they were not directly involved in the underlying transactions themselves, I note that in particular SNC was supposed to be sent every month, at Jessica’s request, inter alia, the bank statement, list of cheques issued, cheque stubs and the original invoices. For example, with a payment supposedly to, say, DHL, while SNC would not have known whether it did occur and whether the weight of goods shipped would appear to be excessive, it would have an original DHL invoice in support. It is reasonable in my judgment for Qvist, in all the circumstances, to expect SNC to study each payment in the bank statement against the cheque stubs and the original invoices, and to raise any concerns or queries with him, in the course of the monthly work it carried out for the 1st defendant. The mere fact that SNC’s fees were relatively modest (at HK$4,500 per month)does not mean that Qvist was unreasonable to expect SNC to perform the aforesaid given what was agreed in the Services Contract and during the meeting with Jessica. It is also reasonable for Qvist to expect SNC to inform him if it had ceased being given the cheque stubs and the original invoices, contrary to what had been agreed. Qvist should not be expected or required to inquire with SNC or Tang from time to time whether the system or practice set up was being followed. 71.Even though SNC, in the context of acting as auditor, in the Audit Engagement Letter said that it had no duty to detect fraud, in its role as the external accountant of the 1st defendant and in the light of what was agreed between Qvist and Jessica, in my judgment Qvist was entitled to expect SNC to handle the payments, cheque stubs and invoices as I find above. 72.I do not place any weight in this regard on the fact that monthly files were sent to the 2nd defendant. Apart from the fact that it was thousands of miles away and with no direct knowledge of the details of each transaction, unlike SNC, there is no evidence that there was any specific and express agreement or understanding as to what the 2nd defendant was expected to do with the files, other than, at most, that Stein would keep an eye. No doubt there is evidence that Stein did raise questions with Qvist from time to time, thereby showing that Stein (or his staff) did study the files, but it cannot mean that the 2nd defendant had assumed a duty, like SNC, to systematically check each payment against the underlying documents or the cheques. 73.As stated above, Mr Chain’s complaint is not so much the system as such, but specifically that Qvist allowed Tang to keep more than one cheque book at a time and to prepare the cheques and monthly accounting bundles unsupervised. In my judgment, none of these matters constitutes a breach of duty by Qvist, considered in the light of a system which I have found to be reasonably adequate. 74.First, the cheque books. 75.It is not in dispute that the 1st defendant had more than one cheque book issued at any one time, all of which were kept by Tang together with the company chop, and after Tang was dismissed one of the cheque books could not be found. The likelihood is that cheques in that cheque book were used by Tang to ask Qvist to sign to pay for genuine invoices which he showed Qvist, but which then Tang discarded without sending out (see §46 above). 76.The defendants argue that by allowing Tang to keep more than one cheque book at any one time, Qvist allowed Tang room for manipulation. 77.However, one must not judge the matter with the benefit of hindsight, and should consider whether, by allowing Tang to keep all the cheque books, as against the system stated above, Qvist was in breach of his duties owed to the 1st defendant. The system of Qvist being the only signatory in the local office, his own checking of invoices before signing, the subsequent monthly checking by SNC and Qvist himself, in my judgment means that to entrust Tang with all the cheque books would not create any reasonably foreseeable risks of fraud by Tang. Of course there is always something more that a senior officer like Qvist could have done: for example to keep all the cheque books and company chop, and to prepare the cheques, personally against original invoices. But the question is not what more Qvist could have done: there is always more that he could have, but whether what he did was inadequate in the discharge of his duty to guard against possible fraud. For example, in theory even original invoices can be forged and should Qvist then be required to call up DHL or FedEx every time to confirm the invoice (and not just seeking confirmation from the handling merchandiser in the office, as any possible fraud of that person would also have to be guarded against)? This would be, in my judgment,unreasonable. 78.Second, the lack of supervision of Tang in preparing the cheques and the monthly accounting bundles. Again, given the system in place I do not think that Qvist was in breach of his duty to guard against possible frauds by Tang, in leaving it to Tang to prepare the cheques and accounting files. The cheques, once prepared, were subject to the scrutiny of Qvist when signing, and to the subsequent scrutiny of Qvist and SNC, as aforesaid. As for the accounting files, since I place no weight on those sent to the 2nd defendant, the material ones were those sent to SNC, and as I find Qvist was entitled to expect to be informed by SNC on any material deviation from the agreed procedure. I accept Qvist’s evidence that he had not been so informed, even though Tang had stopped sending cheque stubs to SNC after April 2012. 79.Mr Chain argues that Qvist should not submit Tang to temptation and to allow a system which allowed him to handle things unchecked, citing the decision of the Scottish Industrial Tribunal in Duncan v Scottish Farmers Dairy Co Ltd [21]. But it is not disputed that some sort of system for checking and reviewing Tang’s work had to be in place, but whether a particular system is adequate is a question of fact. On the facts of this case, in my judgment Qvist was not in breach of his duties in this regard. 80.I reject the defendants’ case on the alleged “Systemic Failure”. D2b. Specific Failure 81.Regarding the alleged “Specific Failure”, the defendants’ case is that had the modus operandi for spot-checking as explained by Qvist been properly and reasonably carried out, he would have detected some of the fraudulent transactions. In his written closing submissions, Mr Chain has divided them into four groups involving 19 transactions (with some falling into more than one group). No issue is taken on the other 31 transactions as such in the written closing submissions. 82.The four groups are described by the defendants as follows:
83.I shall consider each of these groups in turn. But before I do so, I shall state that, as far as I understand, it is not the defendants’ case that this spot-checking system itself is inherently inadequate or defective, but just that had Qvist done the spot-checking properly he would have discovered the frauds. However, again, in my judgment the duty of Qvist in this regard is to perform this task with due care and skill, or with reasonable skill and competence, and not to guarantee that the frauds would be discovered. D2b(i). Rent-free periods 84.Under what is called a “1st Tenancy Agreement” dated 3 November 2011 for the office of the 1st defendant which Qvist personally negotiated, the month of December 2012 was rent-free. Further, as stated at §16 above, under the 2nd Tenancy Agreement, the 1st defendant was entitled to a rent-free period from 1 September 2014 to 31 December 2014. 85.However, Tang created Smokescreen Cheques and Faked Cheques for the months of December 2012, and September, October and November 2014, in the sums of HK$91,158.60, HK$93,223.40,HK$108,343.40 and HK$93,223.40 for each of those months respectively,when the real amounts payable to the Landlord (which would only be for management and utility fees and possibly rates) were HK$21,138.60,HK$17,204.40, HK$32,324.40 and HK$17.204.40 only. The four larger sums were in fact paid to Tang or Fully Sound and appeared on the respective monthly bank statements of the 1st defendant. Apart from salaries, and except for December 2012, each of these payments was the largest debit from the 1st defendant’s current account for the relevant month. 86.In his testimony, Qvist confirms that when he spot-checked every month, he would glance through the payments and would recognise a sum of around HK$90,000 odd as being the rent and related charges to the Landlord, and would not query that. 87.Regarding the payment of $91,158.60, ie the first of the four transactions in issue (and indeed the very first in time of the 50 transactions), when cross-examined, Qvist cannot really recall what action if any he took when he saw that amount being debited on 3 December 2012 from the bank account when he arranged the payment of salary online on about 23 December 2012. The same applies to the other rent-free months (September to November 2014) where Tang also arranged the payment of the full rent from the bank account (to himself or Fully Sound), save that Qvist says he was extremely busy in September and October 2014. However, Qvist accepts that had he kept track of the rent-free months in the tenancy agreements he would have spotted the fraudulent payments purporting to be rent for December 2012, and September and October 2014. The clear inference, which I find, is that Qvist either missed these sums entirely when he spot-checked in each of those months, or if he did not miss them, he failed to notice that they were payments that were not supposed to be made as those were rent-free months. 88.Apart from the salaries, rent was the largest regular debit from the current account in any given month, and this was the case for September to November 2014. Given that rent was a rather large debit,and was usually the second largest expenditure every month, and that Qvist personally negotiated the tenancy agreements (which he said he read in full before signing), in my judgment Qvist ought to have spotted the four payments as questionable, and if so the frauds of Tang would have been exposed (as indeed was the case: the investigation leading to Tang’s exposure was prompted when, as I explain above, Stein asked about the rental payment for November 2014). This is especially so for the rent-free period in 2014, which in fact ran from 1 September to 31 December. Qvist ought to have recall such a substantial rent-free period, even if not the precise dates, then at least a general recollection that the period existed so that he ought to have checked when seeing the monthly payments. In my judgment, Qvist failed to exercise due care and skill, or reasonable skill and competence, in failing to spot these payments during his spot-checking,and was in breach of his duty owed to the 1st defendant. Contrary to what Mr Luxton argues, I do not find what Tang did in relation to these four transactions to be sophisticated in any sense, or that it would need someone with an accounting background to discover them as being fraudulent. 89.Had Qvist spotted the first transaction, and with Tang exposed and no doubt dismissed, all the other 49 transactions would have been avoided. For this reason, in my judgment, Qvist’s breach of duty in failing to spot this transaction allowed and enabled the other 49 transactions to happen, thereby causing the loss to the 1st defendant in each of them. 90.Mr Luxton has relied rather heavily on the fact that neither SNC nor the 2nd defendant spotted the transactions. In my judgment this is neither here nor there, because even assuming both entities had a copy of the two Tenancy Agreements, the question is whether Qvist was, in effect,negligent in failing to spot the transactions and in my judgment the answer cannot be affected by a similar failure of others, which, depending on the circumstances, may or may not be negligent. The failure of another person to spot something which the person accused of negligence has also failed to spot may be taken into account in considering whether the failure of the latter is negligence, but cannot be a defence as such, and in all the circumstances of this case in my judgment Qvist’s failure is plainly a breach of his duty owed to the 1st defendant. 91.Qvist also suggests, when asked about the October 2014 payment purportedly for rent when it was also a rent-free month, that he was very busy that month, and he was probably in the office less than one day per week from 6 to 30 October. But I do not understand it to be his case that in such circumstances he did not need to do any spot-checking for that month when he went online to pay the salaries, or that he could do the spot-checking sloppily. Nor will I accept any such case. The fact remains, in my judgment, that Qvist ought to have spotted this payment as questionable, it would not have taken him long to do so, but he did not. 92.I also note that Qvist in his cross-examination claims that he spotted the fraudulent November 2014 payment of HK$93,223.40 (paid out on 7 November 2014) which was purportedly for rent but was in fact paid to Fully Sound, leading to the exposure of Tang. This is incorrect. According to the bank statement for that month, salaries were paid out on 25 November 2014, meaning that Qvist went online on or just before that date. However, it was Stein, by an email on that date, who queried that payment and even in his reply to Stein that same day, Qvist told Stein that it was rent for November 2014 (after being so told by Tang). That is, not only did Qvist fail to spot this payment as questionable himself, even when asked about it by Stein and thus prompted to consider it more carefully, Qvist failed to recall, or (as he confirms in cross-examination) check whether, it was a rent-free month. 93.If I am correct on this, then Qvist is liable to compensate the 1st defendant for the agreed quantum, subject to the question of the exclusion clause, which I shall deal with in section D2c below. It is therefore not necessary to deal with the other transactions specifically for the purpose of the 1st defendant’s counterclaim. However, I still have to consider whether Qvist was in breach of his duties owed to the 1st defendant for the purpose of deciding whether the 1st defendant was entitled to dismiss him summarily. 94.The same reasoning applies to the other three payments under this group in any event, viewed on their own, and Qvist was in breach of duty in failing to spot each of them. D2b(ii). Payments close to spot check dates 95.The reasoning of the defendants for this group of transactions is as follows, taking one of the transactions (transaction 4 on the Schedule)as an example. This is the transaction where the Faked Cheque numbered 022144, dated 22 April 2013, in the sum of HK$15,437.10, was paid to Fully Sound. The Smokescreen Cheque of the same number, date and amount was made out to FedEx, with a corresponding faked invoice in the files. The real invoice from FedEx is dated 27 March 2013 asking for payment of HK$1,579.31 only, with the due date being 26 April 2013. 96.The bank statement of the 1st defendant for April 2013 shows that the cheque 022144 was paid out on 23 April 2013, and the salary payments were made on 26 April 2013. 97.The defendants’ argument is that, given the due date to pay FedEx was 26 April 2013, Qvist would have signed a cheque for HK$1,579.31 payable to FedEx (which Tang then discarded) not long before he was online on 26 April 2013 making the salary payments and doing his spot-checking. He ought to have remembered that cheque,signed only recently. On the other hand, given that the amount of the Faked Cheque was only debited on 23 April 2013, Qvist ought to have remembered whether he did sign a cheque for HK$15,437.10 quite recently,and if he could not remember that he ought to have checked the records. 98.On being asked about this transaction, Qvist cannot really recall what he did about this transaction (if at all) when spot-checking on 26 April 2013. 99.The argument of the defendants, in my judgment, is very much hindsight. Taking April 2013 itself as an example, the bank statement shows that 22 cheques had been presented, but only one of those was a Faked Cheque. That means that the other 21 were signed by Qvist and properly presented. Between 22 and 25 April 2013, apart from the Faked Cheque, seven cheques were put in, more likely than not to have been signed by Qvist around that period. It would, in my judgment, be imposing too onerous a burden if one is to say that Qvist ought to have remembered details of all the cheques that he signed in the previous few days (which were then presented a few days before, or on, the day of spot-checking), or that he was negligent or otherwise in breach of duty if he failed to spot the transaction as one which he might not have signed before, unless the sum itself was unusually large, which would fall within either the third or the fourth group but not the present. 100.I reject the defendants’ case on this group of transactions. D2b(iii). Unusual payments 101.In his evidence, Qvist says he expected to have two payments to courier companies every month, likely to be more than HK$15,000 each. 102.Thus, the defendants argue, where in a month there were three or more payments of more than HK$15,000 each, apart from salaries and rent, Qvist ought to have checked. If he did, he would have found that the four transactions in this group were fraudulent ones. 103.The four transactions are:
104.Qvist is cross-examined, on this particular ground of complaint (ie three or more payments exceeding HK$15,000 apart from salaries and rent), on transaction 31 only. His answer is that May was usually a big month for shipping out samples as the Canton Fair was held in April. Thus these sums would not raise concerns with him. 105.In cross-examination, Qvist further explains that, apart from May, the months of January, June, October, November and December each year were also “high seasons” for shipping out samples and higher courier charges were to be expected. I do not know if Qvist would have given a similar answer for transactions 15 and 16 (given that they were in November) but he is not asked about them specifically, nor is he asked about transaction 10 (which was in August) for which this reason presumably may not apply. But it would not be right for me to speculate. All I can and should say is that the explanation given by Qvist for transaction 31 appears reasonable to me and I accept it. 106.In the premises, I reject the defendants’ case on this group of transactions. D2b(iv). Grossly inflated shipment weight 107.In her evidence Hui says that the usual weight of shipments of samples by the 1st defendant, whether actual weight or dimensional weight (in accordance with which the courier charged for shipments large in dimensions but low in actual weight) was far below 50 kg. Her evidence is not challenged in cross-examination. 108.The defendants’ argument is that the faked invoices for the transactions in this group show unusually high shipment weight. For example, for transaction 4, the faked invoice dated 27 March 2013 shows the weight for the goods shipped was 278 kg whereas the real invoice shows a weight of 40 kg only. Had Qvist checked the files, he would have seen the faked invoice for 278 kg, which was unusual, and he would then have investigated (perhaps by asking the handling merchandiser or checking with FedEx) and discovered Tang’s misdeeds. 109.But the question is whether Qvist ought to have checked the files in the first place and whether he was in breach of duty if he did not. But the reasons offered by Mr Chain in his written closing submissions that Qvist ought to have checked the files are, apart from two transactions,those given for the second and the third groups, which I decline to find in the defendants’ favour. 110.That leaves only the two exceptions, namely transactions 17 and 44, which Mr Chain says were for unusually high sums which Qvist ought to have investigated. 111.Transaction 17 is in the sum of HK$27,820.58. The Faked Cheque was dated 6 December 2013. In cross-examination, Qvist says that that sum appears to be a regular courier bill, albeit higher than usual, but there were no other bills that month, when he was spot-checking, which were likely to be courier bills. Thus it might have been a payment of a few invoices and he did not consider that unusual. That appears to be a reasonable explanation to me which I accept. 112.As for transaction 44, I make no findings on it since Qvist has not been asked about it. D2c. The exclusion clause 113.Qvist relies on the exclusion clause in defence to the counterclaim by the 1st defendant. I quote the entire paragraph which contains the exclusion clause here again for convenience:
114.This paragraph appears to me to serve a number of purposes. First, it defined the areas of authority and responsibilities of Qvist, namely in sales, purchasing, financial, and other (and all) fields. Second, it ensured exclusivity of service to be provided by Qvist. Third, it provided for a release to Qvist from personal liabilities. 115.I have some concerns about the use of the words “personal liabilities for CTC” rather than “personal liabilities to CTC” in the paragraph. This may suggest that the paragraph was intended to release Qvist, not from any personal liabilities that he might owed to the 1st defendant, but only from personal liabilities that he might have incurred on behalf of, and for, the 1st defendant, for example, in dealing with a third party. However, while in such cases Qvist might, depending on the circumstances, incur a personal liability both to the third party (because of his own personal fault) and to the 1st defendant (to compensate it for its liability to the third party incurred by him), it does not make sense for a contract between Qvist and the 1st defendant to release any personal liabilities of Qvist other than those owed by Qvist to the 1st defendant. The 1st defendant was in no position to release Qvist from any other personal liabilities except those owed to itself. At best it could only indemnify Qvist for liabilities owed to others but this is not what the clause said. In the premises, construing the exclusion clause sensibly, in my judgment it was intended to release Qvist from personal liabilities which he might incurred to the 1st defendant while representing it in all fields, including financial affairs. 116.Mr Chain does not suggest that the exclusion clause is otherwise invalid or not “allowed by law”. The only issue is the proper construction of the clause and is a question of law. He submits that the clause is a release of Qvist from personal liabilities when he was dealing with the affairs of the 1st defendant in the capacity of Managing Director. He does not draw a distinction between Qvist acting internally or dealing with third parties, and what Qvist did which I have found to be in breach of his duties were done when Qvist was dealing with the affairs of the 1st defendant as Managing Director, and I find that Qvist is released from personal liabilities therefor. D2d. Mitigation 117.I can deal with this point shortly in the light of my conclusion that the exclusion clause is applicable. 118.Mr Luxton argues that the 1st defendant has failed to mitigate its loss as it failed to pursue Tang for repayment, or others such as SNC or the bank for compensation. 119.However, as stated in McGregor on Damages [26], it is an “undoubted principle” that:
120.Further, the duty of the 1st defendant to mitigate is only to act reasonably and the standard of reasonableness is not high.[27] While the action against Tang might be relatively straightforward, I do not see how the 1st defendant can be said to be acting unreasonably in not pursuing him as the chances of recovery against Tang under a judgment must, in all the circumstances, be uncertain at best. I do not think that the 1st defendant is required to take that uncertainty. As for SNC and the bank, the chances of success are not that certain as those actions would involve claims of negligence, and a plaintiff is not required to start uncertain litigations against third parties.[28] 121.Mr Luxton refers to what HH Judge Downey said in Mingson Industries Ltd v Lin Shun Hung Stephen [29] but that was in the context of a case where His Honour took the view that the claims against the third party were plain and unanswerable, with no suggestion that that was a party of straw or possibly so. D2e. Conclusion 122.For reasons stated above, I find that Qvist had breached his duties owed to the 1st defendant by failing to spot the four payments,purporting to be rental payments, made in the rent-free months of December 2012, and September, October and November 2014, ie transactions 1, 43, 45 and 47 on the Schedule. I reject the defendants’ case on the other transactions. Qvist’s breach on the first transaction was causative of the other 49 as well. However, Qvist’s liability for the 1st defendant’s counterclaim for HK$598,828.99 plus interest is released by the exclusion clause which is applicable in Qvist’s favour. 123.For completeness, I shall refer to the point made by Qvist that his performance as the Managing Director of the 1st defendant had been praised by those in the 2nd defendant, as well as his staff who wrote good reference letters for him after he left the 1st defendant. I fail to see the relevance when those words of praise were uttered without knowledge,or at least with no evidence of any knowledge, of the acts of Qvist which I have found to be breaches of his duties. D3. Was the 1st defendant entitled to dismiss Qvist summarily? 124.The next issue is whether the 1st defendant was entitled to dismiss Qvist summarily. 125.As stated above, Mr Chain is now relying only on habitual neglect of duties. His case, of course, is based on the 50 transactions. 126.However, my assessment of this ground is to be made in the light of my finding that Qvist was in breach of duty in only four of those transactions, all in relation to the rent-free months, even though the loss to the 1st defendant in all 50 was caused by the first one. I should perhaps point out that even had I ruled that Qvist had breached his duties owed to the 1st defendant for transactions 10, 15, 16 and 44 (see §§105 and 112 above) my analysis below would not have been any different. 127.The law on summary dismissal based on habitual neglect of duties is not in genuine dispute. 128.In Chow Yin Chun v Fang Brothers Knitting Ltd [30], Duffy J said:
129.Thus, the neglect of duties must be both substantial and habitual:
130.Regarding substantiality or seriousness of neglect, in Ko Hon Yue v Chiu Pik Yuk [32], in relation to all the grounds of summary dismissal under section 9(1)(a) of the Employment Ordinance, Chu JA said:
131.In considering the question of substantiality and seriousness of the neglect, the court needs to balance the impact of the summary dismissal on the employee (which disentitles him to wages in lieu of notice and other benefits such as severance payment and long service payment) with the effect of the employee’s misconduct on the employer.[33] It is not sufficient if the employee sometimes makes mistakes or is being negligent.[34] 132.Mr Luxton also submits that, in order for the neglect to be substantial, the employee must have been made aware that his conduct has failed to reach the standard required, and he does not rectify the situation. However, I do not think that this is a legal requirement. He cites Ko Hon Yue; Wong Mei Ling Gloria v Xie En International Holdings Ltd t/a Amis [35]; and Smith & Wood’s Employment Law [36] but in my judgment they are not in direct support of such a proposition:
133.In my judgment, the question of whether there have been warnings, while not a legal requirement, is a relevant, perhaps highly relevant, factor for the court in considering whether the employee has so acted to indicate an intention not to be bound by the contract of employment. If he has been warned but still persists in the neglect, that may be a very material pointer to such an intention. But where, especially in a case of incompetence or negligence where the question of whether the employee has fallen below the required standard is a matter of judgment, rather than a case of compliance or otherwise with specific rules where the observance or breach thereof can be determined objectively (such as punctuality for work), if the employee has not been warned and continues to act as before, a conclusion of lack of intention to be bound by the contract may be much more difficult to reach. But in some cases, for example where the safety of others are concerned [38], in my judgment summary dismissal may be justified even when no prior warnings have been given, by reason of the nature of the duty of the employee and the impact or likely impact on the employer and others of a breach. 134.Regarding the question of “habitual” neglect, the neglect of duties must not be a one-off event, but must have happened more than once.[39] It seems to me to be a question of fact and degree whether a series of similar neglects amounts to “habitual” neglect, and the greater number of such neglects (and perhaps with great regularity), the more likely it is that the employee is habitually neglectful. 135.Of course, one single act of misconduct, in truly exceptional circumstances [40], may justify summary dismissal and in such a case no warnings would have been given. However, if a single act is relied upon,it is likely to be a case under section 9(1)(a)(ii) (where the employee “misconducts himself, such conduct being inconsistent with the due and faithful discharge of his duties”) rather than section 9(1)(a)(iv) (habitual neglect), as the habitual element is missing. 136.Applying the above principles, in my judgment, Qvist was not habitually neglectful of his duties so that the 1st defendant was not entitled to dismiss him summarily. Even though he made mistakes when spot-checking in December 2012, and in September, October and November 2014, in failing to pick up the payments purportedly for rent when they were all rent-free months, I do not regard the impact on the 1st defendant to be of sufficient seriousness to satisfy the substantiality requirement. The 1st defendant suffered monetary loss of relatively modest amounts: it is not as if Qvist’s neglect caused any danger to any persons or cause serious harm to the business of the 1st defendant (for example, a neglect resulting in defective products to be sold by it). Balancing the impact on the 1st defendant as against the serious consequence to Qvist himself resulting from the “capital punishment” [41] in the form of a summary dismissal, in my judgment the neglect of Qvist was not of sufficient seriousness to justify summary dismissal. 137.Further, and more importantly, neglectful or careless he might have been, I cannot see how Qvist can be said to be showing an intention not to be bound by his contract of employment. I have already said that in a case of negligence with no prior warning, it may be difficult to come to such a conclusion against an employee, although it must be a question of fact in each case, but I see nothing in this case to justify such a conclusion. The relevant acts were committed by Qvist in the course of performing his duties as an employee, only that he did so negligently, rather than in such a way as to show that he was flouting or disregarding his contractual obligations, such as being persistently late or deliberately acting contrary to some specific rule or direction, or ignoring warnings. 138.I find that the summary dismissal of Qvist by the 1st defendant to be unlawful, and he is entitled to damages at the agreed sum of HK$1,672,948, plus interest. 139.Again, for completeness, Mr Luxton argues that because of the delay by the 1st defendant in dismissing Qvist, it had waived its right to do so. But this point, which is fact sensitive, is not pleaded and not raised at all until closing submissions, and I decline to entertain it. E. DISPOSITION 140.For reasons stated above:
141.I thank counsel on both sides for their assistance.
Mr Nick Luxton, instructed by Holman Fenwick Willan, for the plaintiff Mr Christopher Chain and Ms Sharon Yuen, instructed by C Y Tsang & Co, for the 1st and 2nd defendants Schedule
[1] Despite the title, Qvist was not a director of either defendant. [2] I have retained all the original typographical and grammatical errors in this quote, and in all other quotes, in this Judgment. [3] See §6 of Bunge’s witness statement [4] See §1 of Bunge’s witness statement. In his testimony, Bunge clarifies that he was Qvist’s supervisor only in relation to merchandising, ie he was a, in German, fachvorgesetzter, the best translation of which is “specialist supervisor”. [5] When I refer to “the defendants” in this Judgment, that is without prejudice to their position that only the 1st defendant was Qvist’s employer. [6] Even though the 1st defendant had a number of bank accounts with Hang Seng Bank, it was only the current account that is relevant in this case and I shall refer only to this account in this Judgment. [7] Appearing with Ms Sharon Yuen. [8] Cap 57. [9] A copy of this letter, signed by Classen, was also sent by post to Qvist. [10] Originally, Mr Chain accepts that some of the Smokescreen Cheques were not signed by Qvist but he queries the others, but he eventually abandons this point. [11] [1999] 3 HKC 386 at 390G. See also Wan Wah Sum v Tai Hing Cotton Mill Ltd (HCLA 1/2000, 17 February 2000) at [7] per DHCJ Chu (as she then was); Li Shuk Man v Ho Wai Ling Rebecca t/a Windsor Sauna (HCA 5446/1996, 26 May 2000) at [4] – [7] per Chung J; Chen Henry v William E Connor & Associates Ltd (HCLA 51/2006, 14 May 2007) at [17] per DHCJ To (as he then was). The defendants reserve their position should this matter proceed further. [12] At §4(a). [13] At §6. [14] Qvist first says the “threshold” was HK$10,000 but then he says it was HK$20,000. [15] §35 of the Reply and Defence to Counterclaim. [16] Qvist’s claim was originally made in the Labour Tribunal (LBTC 499/2015). By order dated 6 May 2015, Presiding Officer Daniel Tang transferred the matter to the Court of First Instance. [17] Subsequently, after closing submissions, solicitors for Qvist also refer to a set-off of wages due to Tang for HK$4,955 when he was dismissed, thereby further reducing the amount payable by Qvist if the counterclaim succeeded. I decline to take into account this sum in the light of the express agreement on quantum at HK$598,828.99 because Mr Chain would not have had the chance to deal with this amount had he wanted to, and in any event in the light of my decision on the counterclaim this is academic. [18] See Global Fair Industrial Ltd v Vos (FAMV 7/2015, 10 July 2015) at [16] per Fok PJ. [19] Bowstead & Reynolds on Agency (21st ed, 2018) at §9-004 et seq. [20] In his closing submissions, Mr Chain criticised the evidence of Qvist in these respects, in particular his meeting with Stein, and submits that his testimony goes far beyond his witness statements and should not be accepted. However, in my judgment, Qvist’s testimony is an elaboration of what he says in his witness statements, which is common when a witness is being probed in cross-examination, and I see nothing materially inconsistent between Qvist’s witness statements and his testimony. [21] [1973] IRLR 48 at [19]. [22] Being transactions 1, 43, 45 and 47 on the Schedule. [23] Being transactions 4, 6, 9, 11, 12, 29, 31, 35, 41 and 46 on the Schedule. [24] Being transactions 10, 15, 16 and 31 on the Schedule. [25] Being transactions 4, 6, 9, 10, 11, 12, 15, 16, 17, 31, 35, 44 and 46 on the Schedule. [26] 20th ed (2018) at §9-094. [27] Ibid at §9-079. [28] Ibid at §9-090. [29] [1992] 1 HKC 588 at 589H – 590B. [30] HCLA 55/1987, 21 April 1988, at 2 – 3. This was cited with approval by Yeung JA (as he then was) in the Court of Appeal in Law Ying Chung v Lo Chun-kie t/a Koon Hing Plastic Factory (CACV 28/2004, 15 October 2004) at [41]. [31] Ribeiro, The Law and Practice of the Hong Kong Labour Tribunal: A Socio-legal Study on the Problem of Legal Access (1978) at 57. [32] [2017] 5 HKLRD 510 at [43]. See also Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 1 WLR 698 at 700 per Lord Evershed MR. [33] Tsang Tak Chi v China Wall Ltd[1999] 1 HKC 366 at 371D–E per Yeung J (as he then was). [34] Law Ying Chung at [42]. [35] HCLA 38/2009, 18 March 2010, at [22(3)] per Au J (as he then was). [36] 13th ed (2017) at 455. [37] “the existence of the unfair dismissal legislation is likely to make employers more wary of dismissing summarily and may perhaps make them more likely to punish misconduct by action short of dismissal (eg suspension) or by dismissal by notice after exhausting a set of procedure or warnings and a hearing; this might particularly be the case where the ground for dismissal is incompetence or negligence.” [38] At the trial, the example (given by Darling J in Baster v London and County Printing Works [1899] 1 QB 901 at 903) of a railway signalman being neglectful of his duties but rather fortuitously has caused no accidents have been used for discussion. [39] Kwok Yan Man at 390C–F. [40] Law Ying Chung at §33. 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